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KPMG Pulse of Fintech Report Q2'17

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Total global fintech investment more than doubled quarter over quarter in Q2’17 to US $8.4 billion, up from US$3.6 billion in Q1’17, according to the KPMG Pulse of Fintech report.*

Global M&A investment helped drive the fintech market rebound, with US$5.9 billion in deal value for M&A for the quarter. Comparatively, global VC funding to fintech companies declined slightly, with just over US$2.5 billion in VC funding raised by fintechs in the quarter.

In the Americas, a single deal – the buyout of Toronto-based DH – accounted for US$3.6 billion in deal value, contributing to more than half the total fintech funding during Q2’17. This deal aside, the US and Europe saw the vast majority of fintech investment, with each accounting for US$2 billion. Asia lagged significantly behind the other regions with US$760 million invested. A lack of significant megadeals in Asia likely kept investment relatively weak this quarter.

“Fintech investment has made a comeback this quarter – a sign of renewed investor intent – particularly in the US and Europe,” said Ian Pollari, Global Co-Leader for Fintech, and a partner for KPMG Australia. “Corporates are increasingly accounting for significant amounts of fintech investment – a trend that isn’t likely to let up given the need for financial institutions to digitize the customer experience, become more cost efficient, and find new sources of earnings growth.”

Key Q2’17 highlights

Total fintech investment increased from US$3.6 billion in Q1’17 to US$8.4 billion in Q2’17.

At mid-year, the global median VC fintech deal size of US$12 million for late-stage deals was substantially lower compared to the 2016 total of US$18 million. The median deal size was up for angel/seed stage deals (US$1.3 million) and for early-stage rounds (US$6.2 million).

Corporate VC investment in fintech is on pace to near 2015’s total, with US$2.6 billion invested in deals with corporate participation by the end of Q2’17, compared to US$9 billion in all of 2016, which was skewed by mega-deals. Corporate participation in fintech deals by volume is also up – with 21 percent participation in 2017 deals so far compared to 17 percent in 2016.

Investment in regtech was up significantly in Q2’17, with the US$591 million invested in the first half of 2017 already exceeding the US$583 million raised during all of 2015, and on pace to significantly exceed 2016’s total by year end.

Americas region posts strong fintech results for Q2’17, buoyed by single Canadian buyout and broad US investment

The Americas region led in fintech funding for the quarter, lifted by the US$3.6 billion buyout of Toronto-based payments company DH by US-based Vista Equity Partners. The deal is the largest takeover of a Canadian company by a foreign firm since 2014.

Excluding the DH deal, the US continued to lead the pace in the Americas. The US saw US$2 billion in fintech investment during Q2'17, including five of the top 10 fintech deals globally - AvidXchange (US$300 million), Bright Health (US$160 million), Pos Portal (US$158 million), Fast Match (US$153 million) and Addepar (US$140 million). Strong PE and VC investment helped drive the fintech funding increase in the US, with VC investment rising to over US$1.5 billion across 105 deals.

Europe saw US$2 billion in fintech investment during Q2’17, a significant four-quarter high although well below the peak investment high of US$5.8 billion seen in Q4’15. Deal volume in the region declined from 110 to 90 quarter over quarter, still relatively strong historically.

Median VC deal size in Europe continued to be significantly higher than 2016’s US$10.2 million, with a median of US$15.9 million at the late stage as of the end of Q2’17. Median VC deal sizes also remain higher relative to 2016 at the early stage (US$5.4 million) and angel/seed stage (US$1.2 million).

The UK saw a major positive move one year following the Brexit referendum, with US$1.4 billion in total fintech funding in Q2’17, a six-quarter high, and over US$1 billion more than the Q1’17 tally.

Asia funding holds steady amid continued absence of megadeals

Total fintech funding in Asia remained relatively steady quarter over quarter, with US$760 million invested across 51 deals during Q2’17, compared to US$790 million across 56 deals in Q1’17. Asia’s Q2 fintech financing trends were characterized by geographic diversity and a lack of mega-financings.

China notched nine transactions (VC and M&A) for a total of US$282 million in deal value, a slight uptick from the seven closed in Q1’17. Despite a decline in deal value, India recorded 19 deals and remains on pace to post an impressive year for fintech investment.

Corporate participation continues to soar in the region, with CVC investment growing from a strong 22.5 percent in Q1’17 to a record high of 36.6 percent in Q2’17, revealing a deep interest in fintech innovation from strategic players in Asia.

“Fintech continues to evolve with many established fintechs looking to expand their product offering and their geographic reach,” said Brian Hughes, Co-Leader, KPMG Enterprise Innovative Startups Network, and National Co-Lead Partner, KPMG Venture Capital Practice, KPMG in the US. “In addition we are also seeing new fintechs moving beyond customer facing services to target mid and back office inefficiencies.”

*Data for the Pulse of Fintech report provided by PitchBook.

For more information, contact:

Kent Miller KPMG International +1 908 313 5037 ktmiller@kpmg.com

About KPMG Fintech

The Financial Services sector is transforming with the emergence of innovative products and solutions. This wave of innovation is primarily driven by changing customer expectations and continued regulatory and cost pressures. KPMG is passionate about supporting our clients to successfully navigate this transformation, working directly with emerging fintechs through 30 global fintech hubs. KPMG also brings its global fintech insight to financial institutions, helping them fully realize the potential fintech has to grow their business, meet customer demands, and help them stay relevant and competitive.

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